Fannie and Freddie Downgraded, Too
[Guest post by Aaron Worthing; if you have tips, please send them here. Or by Twitter @AaronWorthing.]
It shouldn’t really surprise you. They had less-than-stellar ratings in isolation, but because of the belief that the Federal Government would bail them out if they got into trouble, they had AAA ratings. So when the Federal Government is downgraded, entities like this follow suit.
But of course the stock market is not happy.
Can we have visible signs of decline under an Obama presidency?
Yes, we can!
——————————–
Full text of S&P’s announcement below the break.
- On Aug. 5, 2011, Standard & Poor’s lowered its long-term sovereign credit rating on the United States of America to ‘AA+’ from ‘AAA’.
- As a result, we have also lowered the long-term issuer credit ratings and related issue ratings on select government-related entities (GREs) to ‘AA+’ from ‘AAA’.
- The issuer credit ratings of these financial institutions and their relevant debt issues are removed from CreditWatch, where they were placed July 15, 2011.
- The outlooks for all 12 FHLBs, and the issue level ratings for Fannie Mae, Freddie Mac, the FHLB System, and the Farm Credit System are negative.
NEW YORK (Standard & Poor’s) Aug. 8, 2011–Standard & Poor’s Ratings Services said today that it lowered its issuer credit ratings and related issue ratings on 10 of 12 Federal Home Loan Banks (FHLBs) and the senior debt issued by the FHLB System to ‘AA+’ from ‘AAA’. We have also lowered the ratings on the senior debt issued by the Federal Farm Credit Banks to ‘AA+’ from ‘AAA’. The ratings on the individual farm member banks are not affected.
In addition, we have lowered the senior issue ratings on Fannie Mae and Freddie Mac to ‘AA+’ from ‘AAA’. Our ‘A’ subordinated debt rating and our ‘C’ rating on the preferred stock of these entities remain unchanged. Finally, we have affirmed the short-term issue ratings for these entities at ‘A-1+’ and removed them from CreditWatch Negative where they were placed July 15, 2011.
The downgrades of Fannie Mae and Freddie Mac reflect their direct reliance on the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship in September 2008 and their ability to fund operations relies heavily on the U.S. government. In addition to the implicit support we factor into our ratings, the U.S. Treasury has demonstrated explicit support by providing these entities with capital quarterly, as necessary.
The downgrades of 10 of the 12 FHLBs and the FHLB System’s senior debt reflect a one-notch reduction in the U.S. sovereign rating. Before we downgraded the U.S., under our GRE criteria, 10 of the 12 FHLB banks were rated ‘AAA’, the same level as the U.S. sovereign because they have either ‘aa+’ or ‘aa’ stand-alone credit profiles and we classify them as having a very high likelihood of receiving support from the government if needed. The FHLBs of Chicago and Seattle were already rated ‘AA+’ prior to the U.S. sovereign downgrade as they have lower stand-alone credit profiles (‘aa-‘ and ‘a+’, respectively) than the other 10 FHLBs. The FHLB System is classified as being almost certain to receive government support if necessary under our GRE criteria. Thus, the FHLB System debt is rated at the same level as the U.S. sovereign rating. The implicit support that we factor into the issuer and issue credit ratings relates to the important role the FHLBs and the FHLB System play as primary liquidity providers to U.S. mortgage and housing-market participants.
The downgrade of the senior debt issued by the Farm Credit System reflects a one-notch reduction in the U.S. sovereign rating. Under our GRE criteria, the Farm Credit System is classified as having a very high likelihood of receiving support from the government if needed. The Farm Credit System’s stand-alone credit profile is ‘aa’. Thus, under our criteria, the notches of uplift that we factor into the ratings on debt issued by the System decrease to one notch from two notches when the sovereign has a ‘AA+’ rating rather than a ‘AAA’ rating. The issuer credit ratings on the four Farm Credit System Banks that we rate are unaffected by the downgrade of the U.S. sovereign given their ‘a+’ stand-alone credit ratings and high likelihood of support classification under our GRE criteria. The implicit government support that we factor into our ratings for the Farm Credit System debt and the four rated banks considers the system’s mission to provide stable and reliable funding to the U.S. agricultural and rural sectors.
We have also lowered the ratings on 126 Federal Deposit Insurance Corp.-guaranteed debt issues from 30 financial institutions under the Temporary Liquidity Guarantee Program (TLGP), and four National Credit Union Association-guaranteed debt issues from two corporate credit unions under the Temporary Corporate Credit Union Guarantee Program (TCCUGP) to ‘AA+’ from ‘AAA’. The downgrades on the TLGP and TCCUGP issues reflect their direct credit support from the U.S. Treasury for timely and ultimate repayment.
The TLGP was formed to facilitate capital-markets borrowing for U.S. banks and bank holding companies during the global credit crisis. Similarly, the TCCUGP was formed to assist corporate credit unions that ran into financial difficulties as a result of significant losses in their investment portfolios.
[Posted and authored by Aaron Worthing.]
i will confess that the people who said it made more sense to make a deal were having the right political calculation. if we let them hit the debt ceiling AND this downgrade happened, then the republicans would be blamed for all of it. It wouldn’t have been fair, but it probably would have stuck.
Otoh, since this is all about our out-of-control debt…
Aaron Worthing (73a7ea) — 8/8/2011 @ 9:26 amSure you can, when the GOP is determined enough to provide it. The idea that one political party would do everything in its power to wreck the economy for purely political gain no longer seems controversial.
2 weeks ago, Fox viewers were told a downgrade might be a good thing (Cavuto). This morning, Fox viewers were told repeatedly that the downgrade the GOP caused is a tragedy that must be blamed on the White House.
There’s a good reason Fox viewers seem so confused so often.
spartacvs (2d9449) — 8/8/2011 @ 9:28 amNOW can we maybe “claw back” (to use the press phrase) the millions in bonuses stolen by Freddie/Fanny directors by manipulating the system?
Bigfoot (8096f2) — 8/8/2011 @ 9:29 amWorthing:
That may be the media narrative, but the public doesn’t rate the debt all that high, not compared to concern for the economy and unemployment. So if you think you are going to ride the debt/taxes hobby horse to victory in 2012. Have at it.
spartacvs (2d9449) — 8/8/2011 @ 9:32 amYes, it is difficult keeping up with the spin from Geithner, Axelrod, and Plueff.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 9:32 amIt’s almost like they’re mounted on a Lazy-Susan.
Nothing will detour spvrty from Teh Narrative.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 9:33 amSpurty is still waiting for the Bawney Fwank talking points. He already spit out the MMfA ones.
JD (29e1cd) — 8/8/2011 @ 9:38 amI suspect that Spartacus is dyslexic with ADD, too.
Summit, NJ (75c9eb) — 8/8/2011 @ 9:39 amGosh, the little previously banned troll is last naming you now, Aaron. Is this someone you know?
Simon Jester (89cf96) — 8/8/2011 @ 9:46 amIs there a math error in this downgrade??????????????
This downgrade is not justified!!!!!!!!!!!
This is a Tea Party downgrade, nevermind the results of Fannie and Freddie!!!!!!!!!!
daleyrocks (bf33e9) — 8/8/2011 @ 9:53 am#2 is an ad hom spew. #4 is a perfect recitation of the Alan Colmes meme on this issue: “it’s not important because the public at-large doesn’t care”. Well, maybe they will care now, hmm?
Icy Texan (41c503) — 8/8/2011 @ 9:57 amPresident Miserable Failure scheduled to speak at 1PM ET.
Expect him to be late as usual.
gp (72be5d) — 8/8/2011 @ 9:57 amHasn’t he learned yet to schedule these things for after Rush’s radio time?
GOLD @ $1717!!!!!!!!!!!!!!!!!!!!!!!!
AD-RtR/OS! (b759aa) — 8/8/2011 @ 10:00 amExplains a lot.
spartacvs (2d9449) — 8/8/2011 @ 10:06 amHawaiian Blowhole 10+ mins late as usual.
gp (72be5d) — 8/8/2011 @ 10:10 amResheduled for 1330ET.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 10:14 am“My fellow Americans, 35 months after the worst financial panic in our lifetimes (so far,) we haven’t fixed anything. In fact, we made it worse. The biggest credit bubble in history is still growing, even faster now.
I have come before you today, 32 minutes late for this speech, to say: You’re Welcome!”
gp (72be5d) — 8/8/2011 @ 10:18 am“The Devil made me do it!”
AD-RtR/OS! (b759aa) — 8/8/2011 @ 10:21 am#18 – That reminds me, we haven’t seen Flip Wilson since Michelle became Mrs. Obama. She do look like “Geraldine”, don’t she?
Summit, NJ (75c9eb) — 8/8/2011 @ 10:34 amGeraldine was thinner, with better legs.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 10:34 amS&P 500 reassured by President Blowhole’s remarks, now down 5% on the day. Smart Power!
gp (72be5d) — 8/8/2011 @ 11:01 amThis is what happens when you go after the productive, demonize them while praising the unproductive and showering them with things they don’t deserve.
Oh well, c ya at 9K.
S. Carter aka J-Z (786e37) — 8/8/2011 @ 11:06 amPlus, POTUS is not a terribly bright guy so he fails to grasp some of the more subtle inter-connectedness of things ….. like S&P saying two weeks back that if not $4 trillion in real cuts we are downgrading.
I guess he thought another speech where MSNBC comes out and licks hills balls while the NY Times messages his prostate would keep the S&P bogey man at bay.
S. Carter aka J-Z (786e37) — 8/8/2011 @ 11:13 ammessages = massages
S. Carter aka J-Z (786e37) — 8/8/2011 @ 11:13 amAnd we’re not likely to, ever again, since he died in 1998.
Chuck Bartowski (4c6c0c) — 8/8/2011 @ 11:14 amDid Obama appoint Warren Buffet his financial markets czar when nobody was looking? To hear Obama speak, it sounds like all he cares about is whether the Oracle of Omaha thinks the markets are hunky-dory.
How do all the leftists feel about a multi-billionaire dictating financial policy to the most progressive White House since FDR?
JVW (4d72aa) — 8/8/2011 @ 11:25 amOh, it’s OK since he’s assigned most of his wealth to a charitable foundation where it will end poverty and hunger throughout the world.
Kumbayah…..
AD-RtR/OS! (b759aa) — 8/8/2011 @ 11:28 amObama believes the discussion and debate were the problem; he fails to grasp the spending is the problem.
Words fail me here.
Let me be clear…this man has nothing new nor substantive nor useful to offer us other than warmed over liberal bromides and cliches. The more he talks the emptier his suit gets.
Bugg (ea1809) — 8/8/2011 @ 11:29 am#25 – That was the story that they put out. Cross reference Flip’s death certificate with Michelle’s marriage license. Coincidence? Did anybody ever see Geraldine and Michelle together in a room at the same time? No, they have not. Trust me on this one. It explains a lot about Barack, DADT, etc.. This is the story that the msm isn’t telling you. Who would put it past the Democrats? 🙂
Summit, NJ (75c9eb) — 8/8/2011 @ 11:56 amThere must be something really weird in the water in Joisey.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 11:59 amAre you talking about Bambi or Spurtycolostomybag?
Darth Venomous (a0b6a2) — 8/8/2011 @ 12:13 pmCRA + ACORN + FM2 + MBS’s + AAA ratings = A perfect storm of financial doom.
Was there one single cause? No.
But, they were all significant players, no less than the protectors of this scheme in the corridors of power in DC:
Jimmy Carter for creating CRA,
Bill Clinton for expanding CRA,
ACORN for extorting the banks,
FM2 for giving the real-estate players a place to dump their worthless paper,
Chris Dodd, Barack Obama, Barney Frank, Maxine Waters et al for providing political cover for the machinations underway at FM2 that enriched fellow Dem pols sinicured on the boards (are you listening Franklin Raines, Rahm Emmanuel, Jamie Gorelick, et al),
HUD Sec, and now NY Gov, Andrew Cuomo, who pushed minority ownership as official government policy before GWB had even thought of an Ownership Society,
…well, you get the idea; plus, let’s not forget that in 2001 – the first year of the Bush Administration – the House held hearings to rein-in the abuses going on at FM2, and the Ranking Member of the House Banking Cmte threatened to stop all financial legislation unless this was stopped, and he was backed-up in his threat by the Chrmn of the Senate Cmte on Finance, and that was the end of any attempt to stop the abuse.
…cross posted…
AD-RtR/OS! (b759aa) — 8/8/2011 @ 12:28 pm“Fox viewers were told repeatedly that the downgrade the GOP caused” comment by Sparta. Is this what Fox really said? Come on, be truthful now.
Doesn’t Michelle look more like Aunt Esther?
PatAZ (da3db7) — 8/8/2011 @ 12:35 pm-621!
…and the hits keep coming.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 12:51 pmNope.
AZ Bob (7d2a2c) — 8/8/2011 @ 1:15 pmObama and company hope that the public doesn’t care about the debt. After the bloodbath today, we sure as heck care. And yet all Obama can talk about is more spending and taxes. I love the term Rush coined: Debt Man Walking.
rochf (f3fbb0) — 8/8/2011 @ 1:44 pmFm the Instapundit….
PRESIDENT DOWNGRADE: Dow Finishes Down 634 Points. Obama’s speech certainly did nothing to slow the drop, though I suppose the White House will argue that it would have been 734 without the speech, meaning that Obama saved or created 100 Dow points . . . .
AD-RtR/OS! (b759aa) — 8/8/2011 @ 1:47 pmI’m sure he’ll blame the unrest in the UK for our economic troubles as well. If he can blame ATM’s, the Japan earthquake and the Middle East unrest, me might as well blame Europe, too.
rochf (f3fbb0) — 8/8/2011 @ 1:58 pmThe dow will finish down 862.
DohBiden (d54602) — 8/8/2011 @ 1:59 pmFunny that you don’t specify who on FNC said the second thing. Was it Cavuto? If not, then what exactly is your point? Does anyone expect every opinion-giver on the same network to say the same thing, as if they’re spokesmen for the network and have been given the company line?
Milhouse (9ae5a3) — 8/8/2011 @ 2:21 pmJust say “nO”
Kevin M (4eb9c8) — 8/8/2011 @ 2:22 pmEven if true, how does B contradict A?
Milhouse (9ae5a3) — 8/8/2011 @ 2:23 pmThis just in:
Fox tries to give you more than one POV in the name of being balanced, and if you can find two people saying opposite things that doesn’t prove any hypocrisy on the network’s behalf!
And of course our debt is out of control. It gets old seeing liars make lame blame games that don’t even make sense, let along attempt to solve the problem.
Where is Obama’s solution? He promised to fix this and had both houses of congress for two years.
Dustin (b7410e) — 8/8/2011 @ 2:29 pmDustin, he is searching relentlessly for a solution that is buried on a 14th green somewhere in America.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 2:32 pmI see the economy continues to collapse.
The Great Black Dope strikes again.
November 2012…get here soon, please.
Dave Surls (6fb051) — 8/8/2011 @ 2:39 pmOf course, Luke and Spartacvs’ demonization of opposing viewpoints is pretty consistent Democrat behavior, why Democrats don’t think you are even entitled to hear opposing viewpoints. Since they might actually, you know, convince you or something.
SPQR (26be8b) — 8/8/2011 @ 2:52 pmI’m DOWn; I’m really DOWn;
The Beatles (9d1bb3) — 8/8/2011 @ 2:57 pmI’m DOWn; I’m really DOWn;
How can you laugh?
When you know I’m DOWn?
Even on MSNBC, don’t the various hosts differ on anything? Are they all forced to stick to the company line on every single matter, large or small?
Milhouse (9ae5a3) — 8/8/2011 @ 3:02 pmMilhouse, I think Joe Scarborough was rebuked for contradicting another MSNBC host but I’m blanking on who it was.
SPQR (26be8b) — 8/8/2011 @ 3:05 pmDon’t tell me Bawney and his prostitute were downgraded?
DohBiden (d54602) — 8/8/2011 @ 3:13 pmDohBiden – are you telling us that, while most elected politicians have constituents, Mr Frank has <iprostituents ???
Alasdair (e7cb73) — 8/8/2011 @ 4:33 pmMika ‘Lincoln is my favorite Founder’ Brezinski
ian cormac (81c5c2) — 8/8/2011 @ 4:36 pmspurty
it is not spin to say that S&P is motivated by the debt.
Its reading comprehension.
What they said was they had no confidence that we would get this debt under control.
They also, as bone to both sides, said that you could raise revenue or cut spending, or some mix thereof.
That, no spin, is what they said. And you know it. You are just not being honest when you pretend they said anything else. Either that or you have trouble with English.
Aaron Worthing (73a7ea) — 8/8/2011 @ 4:57 pmAlasdair, no, he’s talking about the prostitute who was Frank’s partner in the ’80s. I think they broke up PDQ after the scandal broke.
Milhouse (9a4c23) — 8/8/2011 @ 5:00 pmAt this rate my gold and silver stash will be worth more than my Benny Bucks.
Another Chris (c983db) — 8/8/2011 @ 5:39 pmIIRC the guy who was running a “male escort service” out of Barney’s basement is a previous boyfriend, who was replaced by the guy who was/is over at Fannie/Freddie.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 5:42 pmAC, we are experiencing something unique, where Gold and Platinum are at about the same price.
AD-RtR/OS! (b759aa) — 8/8/2011 @ 5:44 pmPlatinum has always brought a higher price –
People are scared.
Roger Ailes does.
Fear Factory
Spartacvs (2d9449) — 8/8/2011 @ 5:56 pmWhat show does Roger have, what is the broadcast schedule?
AD-RtR/OS! (b759aa) — 8/8/2011 @ 5:59 pmRolling Stone is not much of a source, ya nut.
Bill O’Reilly has about a 1:1 left to right ratio. That’s not too unusual for that cable channel.
I don’t like Fox, just because I think the TV format is for entertainment more than information, but it’s clearly the best of the 3-4 cables right now. It’s clearly the best way to know what both sides are thinking. The competition is really quite bad at giving the right a fair hearing.
Dustin (b7410e) — 8/8/2011 @ 6:00 pmDustin – sporty doesn’t care. He has the MMfA hatred the same way the other leftists trolls do.
Did it ever answer my question about the names it posted under, or stashiu’s question about Japan?
JD (318f81) — 8/8/2011 @ 6:04 pmSpartacvs continues to beclown himself.
SPQR (26be8b) — 8/8/2011 @ 6:04 pmOf course not.
Spartacus, when is the last time you were in Japan? Why have you ignored this question?
Dustin (b7410e) — 8/8/2011 @ 6:08 pmI’m sure that our Brave Gladiator would acknowledge that just as Roger Ailes calls the tune for all political opinion at Fox, that what comes out of Rachel Maddow’s mouth at MSNBC is straight from the head of Comcast, right?
AD-RtR/OS! (b759aa) — 8/8/2011 @ 6:20 pmAnd that all political opinion on CBS is written in the Executive Suite at Viacom?
I would mention Disney/ABC, but Disney might just be more left than ABC.
Spartac please stop masturbating to obama.
DohBiden (d54602) — 8/8/2011 @ 6:23 pmHe’s old enough to do that?
AD-RtR/OS! (b759aa) — 8/8/2011 @ 6:25 pmHey Sparty,
The Riots in London–One looter said:
Looks like the poor and minorities are getting tired of paying their “Fair Share” TM -B.Obama
BfC (2ebea6) — 8/8/2011 @ 6:55 pmYes he is old enough we need to intervene before his masturbation takes priority over him eating or drinking.
DohBiden (d54602) — 8/8/2011 @ 7:06 pmOr, as this blog calls it:
Democrats Continue To Accuse The Tea Party Of Terrorism As Leftists Burn London To The Ground.
BfC (2ebea6) — 8/8/2011 @ 7:19 pm“30.There must be something really weird in the water in Joisey.”
Mostly a lot of fat chicks, but a few hotties.
It isn’t South Beach, I’ll grant you.
Summit, NJ (75c9eb) — 8/8/2011 @ 11:35 pmRolling Stone?! The same Rolling Stone that did that hit piece a few months ago on our brave servicemen in Afghanistan — the same ones that you’re pretending in another thread to admire so much?
Milhouse (ea66e3) — 8/9/2011 @ 12:16 amMilhouse – which guys are you sticking up for?
Spartacvs (2d9449) — 8/9/2011 @ 7:27 amOh “spartacvs”. Tick tock.
Stashiu3 (44da70) — 8/9/2011 @ 7:31 am